Financial institutions serve many purposes in a financial system
. They provide financial intermediation services to consumers and businesses and transact in the financial markets. Financial institutions intermediate between lenders and borrowers in the hope of earning a profit by acquiring funds at interest rates that are lower than they charge when they sell their financial products. But there is no free lunch here.
The differences in the characteristics of the financial planes financial institutions buy and sell expose them to a variety of risks in the financial markets and reserved funds invested in the best forex trading futures are not enough to fully protect them from loss.
As testimony to the importance of successfully managing these risks, the decade of the 1980s was a battleground now littered with the corpses of financial institutions that failed to adequately manage these risks. Managing these risks does not mean eliminating them as there is a trade-off between risk and higher profits. Managers who take too few risks sleep well at night but eat horribly and their slumber reads every word of declining earnings and stock prices that their shareholders will not tolerate for long because he is passing on forex trading tips that he should have acted on. On the other hand, excess risk taking that is betting the bank and losing is also bad news. It will place you in the ranks of the unemployed with an armada of expensive Wall Street lawyers defending you.
This is the dilemma that any financial manager must navigate in order to have a successful career. First and foremost a manager is a guardian of funds and a champion of capital preservation. Any manager who does not have this as his first line of duty is not worthy of the position and will not be long in the financial world.